American Leftist on why the financial blog Calculated Risk explains what’s going on way better than most left websites.
They post frequently during the day in response to events, and the comments are absolutely phenomenal, with some more radical than what you would encounter on political blogs, because some of the posters understand the relationship between the methods of crony capitalism and political power. It is, despite its absence of any overt ideological perspective, one of the most left blog sites around because the events that it examines are essential for any leftist to understand when contemplating the future of neoliberal capitalism and the American Empire.
I agree. In its own non-political way, CR indeed can be quite radical. The financial industry insiders who post and comment there can be scathing in their critiques of how our financial system has gone wrong. Moreover, they frequently are weeks, sometimes months, ahead of mainstream financial media on what’s really going on.
Also, and this really needs to be said, CR knows what they’re talking about and too much of the left doesn’t, as witness this this uncomprehending report from Counterpunch on the collapse of that Carlyle fund.
The politically-connected Carlyle Capital hedge fund defaulted on $16.6 billion of its debt. Carlyle boasted a $21.7 billion portfolio of AAA-rated residential mortgage-backed securities, but was unable to make a margin call of just $400 million. (Where did the $21.7 billion go?)
A multitude of financial blog posts and articles, including from CR, have explained clearly what happened. The fund put up about $800 million and used that to purchase $20bn more, making them leveraged at about 20-to-1. So if the trades go even slightly wrong, they take a big hit. But these trades went seriously wrong. So they got a margin call. If everything you own is margined and the value drops sharply and you have trouble selling because there are no buyers – then your holdings become valueless in terms of making a margin call. But Counterpunch doesn’t appear to understand these fairly simple, widely reported facts. They compound their errors by getting all conspiratorical about how the Fed wants to save Bear so the world financial system doesn’t implode. Like it would be a good thing if it did? Like the Fed should do nothing?
That’ why Calculated Risk is so valuable. They understand what’s going on, report it concisely, and yes, can be plenty critical of governmental, investment bank, and mortgage company practices too. Other excellent financial blogs include Mish’s Global Economic Trend Analysis and Naked Capitalism.
A commentator on NPR yesterday made the point (oft made over the years by conservatives, but you won’t find many of those in the White House these days) that the best approach to recession is the let it run its course. He noted that down cycles are normal, and they weed out companies with inefficient management. Yes, they have unpleasant side effects– but as we’re seeing, the liberal Keynesian approach just makes things worse.
I’m baffled that, as worldwide confidence in the dollar plunges, Bernanke keeps dropping interest rates and flooding the market with more dollars. Does he own gold stocks or something? In an economy where inflation is running 6.8% (NOT including food and fuel– real inflation may run as high as 12-13%), it doesn’t matter how low you drop the interest rate. It’s not going to free up credit, because no one can make any money at the lower rates!
I don’t think he has a choice. he needs to flood the markets with money to try to unfreeze that which is frozen. And he can’t just let Bear collapse, because of the counterparty agreements Bear has with others – doing so could easily cause cascading collapses in other firms.
His first line of defense should be to prop up the currency. People are more inclined to lend if they know the dollars they get back will be worth something. But accelerating inflation compounds the already risky economy. Interest rates MUST rise if credit is to be available.